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Earnings Preview: AMR to report 2Q results

FORT WORTH, Texas (AP) -- The CEO of American Airlines parent AMR Corp. has said the company expects to report a second-quarter profit for the first time since 2007.

We'll find out Thursday, when AMR reports financial results.

It could be AMR's last full quarterly report before it completes a merger with US Airways and changes its name to American Airlines Group Inc. The companies expect to close the merger — which is still being reviewed by antitrust regulators in the Justice Department — before the end of September.

WHAT TO WATCH FOR: AMR has cut labor costs by nearly one-fifth through layoffs as it has restructured under bankruptcy protection since late 2011. That has helped the company polish its bottom line even though revenue has lately been less than it was a year ago.

American, the nation's third-largest airline, has been providing monthly financial updates to a federal bankruptcy court in New York. Those reports showed a loss of $105 million in April but net income of $65 million in May. The figures include the American Eagle regional-airline subsidiary.

CEO Tom Horton has sounded increasingly bullish about the second quarter. After AMR reported the May profit — with June, normally the quarter's strongest month, still to come — Horton said that AMR expected to report "a strong, profitable second quarter — our first since 2007."

The recipe for improvement has been lower labor and fuel costs. AMR's labor spending in May was down 19 percent from a year earlier, and fuel expenses dropped by 8 percent.

That helped overcome a 2 percent decline in revenue, as the pace of airline fare increases slowed.

WHY IT MATTERS: AMR is looking to carry momentum into its pending merger with US Airways, which after two trips through bankruptcy court set a company record for profit in 2012.

AMR's recovery should make the new, post-merger American Airlines a stronger competitor against United and Delta. It will combine American's strength in the middle of the country and to Latin America with US Airways' larger presence in the East and its additional European destinations, and it will have fixed what Horton said were higher labor costs than rivals.

WHAT TO EXPECT: AMR shares were taken off the New York Stock Exchange after the bankruptcy filing. Although the shares still trade over the counter, analyst coverage is light — only one made a prediction about second-quarter earnings, according to a FactSet survey — so it will be difficult to say whether the company beats or falls short of expectations.

LAST YEAR'S QUARTER: The Fort Worth company lost $241 million, which was only modest improvement from a $286 million loss a year earlier. However, AMR said that excluding bankruptcy expenses and other special items, it would have earned $95 million in last year's quarter. Revenue rose 5.5 percent to $6.5 billion.